Between a rock and a hard place

“THE SENATE Finance committee will zero in on the government’s spending catch-up and impact of the escalating Sino-US trade war as the chamber begins on Wednesday its parallel hearings on the proposed P4.1-trillion national budget for 2020.

“The proposed spending plan for next year is 12% more than the P3.662-trillion 2019 budget and is 19.4% of GDP, with planned infrastructure expenditure topping spending priorities at P972.5 billion, equivalent to 4.6% of GDP.” [Senate body keen on GDP catch-up plan, Charmaine A. Tadalan, BusinessWorld, 26th Aug 2019]

Catch-Up to us means spending. Because it is the elixir, the silver bullet?

Consider: “Powell Highlights Fed’s Limits. Trump Labels Him an ‘Enemy,’” Jeanna Smialek, The New York Times, 23rd Aug 2019.

“Jerome H. Powell, the Federal Reserve chair, kept future interest rate cuts squarely on the table on Friday but suggested that the central bank was limited in its ability to counteract President Trump’s trade policies, which are stoking uncertainty and posing risks to the economic outlook.

“While monetary policy is a powerful tool that works to support consumer spending, business investment, and public confidence, it cannot provide a settled rule book for international trade.

“Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States [and] there were no recent precedents to guide any policy response to the current situation.”

In other words, even in a $20-trillion economy, monetary interventions can’t be the cure-all; and especially in our case when we aren’t the favored destination for foreign direct investment, among our many shortcomings.

Are we between a rock and a hard place? Isang kahig isang tuka? Isn’t this like a broken record to Juan de la Cruz yet? Does PH have a design flaw? Here’s a quote from a posting in December 2015, “The same kind of thinking?”

“We can’t solve problems by using the same kind of thinking we used when we created them.” [Albert Einstein]

“Poverty alleviation is the main concern of many countries. Poverty is said to be an economic, social, cultural, political and moral phenomenon. Like the issue, its solutions are multi-faceted. It requires a collective action from governments, corporations, citizens, consumers, workers, investors and educators . . . The country’s poverty is more of a shameful condition than a pitiful one. It has not substantially improved since the 1990s.” [Ethical business actions and poverty reduction, Marie Annette Galvez-Dacul, Green Light, The Standard, 6th Dec 2015]

“Economic Growth Didn’t Ease Poverty,” Benjamin E. Diokno, Core, BusinessWorld, 8th Dec 2015. “The first Millennium Development Goal (MDG) is to halve poverty incidence by 2015. Despite the above normal economic growth during the last four years, the Philippines will miss this goal. By contrast, the same goal has been reached globally in 2000, five years ahead of schedule.

“Likewise, our ASEAN-6 (Association of Southeast Asian Nations) neighbors -- Indonesia, Malaysia, Singapore, Thailand, and Vietnam -- have met this lofty goal many years ago. This suggests that our Asian peers are doing things right while we continue to muddle through.” 

“To argue that jeepneys should not be phased out because they are a tradition is to say we never should have stopped burning wood for fuel . . . The romanticized notion that the jeepney is a testament to Filipino ingenuity and resourcefulness because it was built out of army jeeps left behind by the US forces after World War II is today as outdated as the vehicle itself. We need a better symbol of Filipino ingenuity and resourcefulness—preferably one that doesn’t belch smoke.” [Smokescreen arguments, Editorial, The Standard, 9th Dec 2015]

Does PH have a design flaw? Several postings ago, the blog talked about the writer visiting the Museum of Flight. It was once known as “The William E. Boeing Red Barn; the two-story barn is the historic birthplace of the Boeing Airplane Company.”

Note they are not exempt from design flaws: “The fatal flaws with Boeing’s 737 Max can be traced to a breakdown late in the plane's development, when test pilots, engineers, and regulators were left in the dark about a fundamental overhaul to an automated system that would ultimately play a role in two crashes.” [Boeing Built Deadly Assumptions Into 737 Max, Blind to a Late Design Change, Jack Nicas, Natalie Kitroeff, David Gelles and James Glanz, The New York Times, 1st Jun 2019]

In our case, and why the blog keeps raising that Mahathir embarked on Build-Build-Build 40 years ago, infrastructure development is like human development. It takes a generation. Unsurprisingly, “Top economist urges gov’t to tap PPP as ‘Build, Build, Build’ sputters,” Ben O. de Vera, Inquirer Business, 15th Aug 2019.

With due respect, there is no way to catch up for PH, in the foreseeable future, from an infrastructure standpoint. If spending per se is not a magical potion, so is Build-Build-Build. Catch-up is a euphemism for “quick fix” aka “Pinoy abilidad.” 

Consider: We stopped talking about Arangkada, which could have been the key in our pursuit of industrialization.

Instead, wittingly or not, we chose to mortgage the future, especially of the succeeding generations. [See below re toxic Filipino culture.] Why? We continue to narrow our income stream to OFW remittances and the BPO industry. [See above re Einstein.]

It is not about catch-up. It is about putting up the building blocks of an ecosystem.

Consider: (1) Marcos was supposed to be the quick fix with the New Society otherwise known as martial rule; (2) We wanted to keep the Philippines for the Filipinos, so we wrote a constitution that won’t attract foreign investment; (3) We want an exclamation point on that and kicked out the US military; (4) We assumed we had addressed unemployment and celebrated the OFW phenomenon and the BPO industry instead of pursuing industrialization; (5) To solve poverty and insurgency we saw land reform as the prescription; (6) To bring governance closer to the people we created LGUs – and to add insult to injury, we now want a federal system; (7) To fix the drug problem we applauded EJK. We can all add to the list.

What is an ecosystem? Recall Mahathir: “Mahathir came to power in 1981 and was the first non-aristocratic leader of Malaysia.

“He is credited with replacing colonial subservience with national pride and raising a country from the Third World to developed world status at an astounding pace.

“Mahathir also ambitiously pursued economic reforms, such as orienting the economy toward the production of export goods, promoting joint ventures with Asian firms, and privatizing many state industries.

“Mahathir bin Mohamad was the leading force in making Malaysia into a major industrial power. He is credited with turning Kuala Lumpur into a modern city with (for a while) the world’s tallest building and high-tech industrial areas but criticized for ignoring the villages and provinces. Even, his home province of Kedah seems undeveloped and stuck in a time warp.

“Mahathir developed the ‘Malaysia Can’ slogan in 1993 and developed the Vision 2020 program in which he planned to make Malaysia a fully developed country with 70 million people (compared to 20 million in 1998) by the year 2020.

“Mahathir put much money into expansive infrastructure projects … and high-tech development even when Malaysia was suffering an economic crisis. Mahathir once called himself a ‘cyber addict.' He was one of the first world leaders to have his blog and website and said he wanted to create a paperless government in Malaysia.

“Vision 2020. The aim [is] to turn Malaysia into a fully industrialized country and to quadruple per capita income by the year 2020. It will require the country to continue ascending the technological ‘ladder' from low- to high-tech types of industrial production, with a corresponding increase in the intensity of capital investment and higher retention of value-added (i.e., the value added to raw materials in the production process) by Malaysian producers.

“One of Dr Mahathir’s ambitions was to make Malaysia into an Asian Silicon Valley. Foreign companies were invited to invest in a ‘Multimedia Super Corridor’ between the new international airport and the twin Petronas Towers, which rise like gigantic pewter cocktail shakers in the center of Kuala Lumpur. An international committee of experts, including Bill Gates, advised Dr. Mahathir that, if he wished to attract foreign investment, censoring the Internet would be unwise.

“Mahathir sought to shake the colonial past, to remake his county and people much as he has transformed the natural landscape of Malaysia. Omar bin Sidek, a 91-year-old with a wispy white beard, remembers the long years when his town of Dengkil in Selangor state was a modest jungle outpost amid vast oil palm plantations, long a mainstay of the Malaysian economy. ‘Ooh, I'm speechless to describe the change,’ said Omar, squinting to recall life before Mahathir’s major public works came to this area 25 miles south of Kuala Lumpur, the capital.

“While the export of raw material remained a vital part of the Malaysian economy, manufacturing became more of a focus under Mahathir. Essential manufactured goods have included rubber gloves, catheters, rubber-threads, room air conditioners, semiconductors, and audio-visual equipment.

“By the 1990s Malaysia had become the world’s largest exporter of semiconductors, an industry that dates to the mid-1970s when many U.S. and Japanese companies set up factories in Malaysia. At that time, there was also a trend to produce more assembled products like cameras and VCRs from semiconductors in Malaysia.

“Malaysia’s rapid development has been attributed to the transparency of government policies, its educated and skilled workforce, well-developed infrastructure, excellent communications facilities, and efficient bureaucracy.

“High tech industries developed in Malaysia in the 1990s and 2000s included advanced electronics, scientific instruments, biotechnology, automated manufacturing systems, electro-optics and non-linear optics, advanced composite materials, optoelectronics, software engineering, alternative energy sources, and aerospace.

“Malaysia in the 1990s was reminiscent of South Korea in the 1980s and Japan in the 1960s and 1970s, when people are intoxicated with their new affluence and happy to leave their poverty behind them.

“Over these three decades, Malaysia accomplished a transition from a primary product-dependent economy to one in which manufacturing industry had emerged as the leading growth sector. Rubber and tin, which accounted for 54.3 percent of Malaysian export value in 1970, declined sharply in relative terms to a mere 4.9 percent in 1990.” [http://factsanddetails.com/southeast-asia/Malaysia/sub5_4a/entry-3627.html]

What is an ecosystem? It is akin to a virtuous circle and thus yields the common good.

Sadly, we can’t seem to get a good handle on the common good. For example: “In grade school, ‘toxic Filipino culture’ used to mean the likes of ningas cogon, mañana habit, Filipino time and bahala na. But modern times and our shift to more urban lives have swung the spotlight to other negative traits in the Filipino psyche, at least among many young people who chafe at these norms and feel the need to speak up about them. The sense of openness and frankness that the modern era has fostered allows us to see more clearly the downside of unsavory but deeply embedded traits disguised as conventional interpersonal relations and cultural habits, and to challenge their place and purpose in our evolving society. From here, future generations will be the beneficiaries of any changes we are bold enough to apply to our Filipino-style parenting, relating and coexisting practices.” [Toxic Filipino culture (?), Michael Baylosis, opinion.inquirer.net, 23rd Aug 2019]

Here’s a great example of a vicious circle or what a virtuous circle is not: “THE Local Government Code of 1991 decentralized local government units (LGUs) and, for this purpose, LGUs were given an annual allocation (allotment) of 40% of national tax collections (Internal Revenue Allotment or IRA). The IRA is in addition to the local taxes that the LGUs already impose and may impose in their respective jurisdictions. Now, after a long 28 years, this decentralization does not seem to have provided the improvements in the lives of our citizens that its proponents had argued as reason for its adoption.

“The decentralization is a failure.” [Decentralization, PH-style, Benjamin R. Punongbayan, BusinessWorld, 26th Aug 2019; Benjamin R. Punongbayan is the founder of Punongbayan & Araullo, one of the Philippines’ leading auditing firms.]

More than a failure, because of our perceptive judgment that is suspect, instead of leveraging economies of scale given our minuscule national income per capita, we chose to spread it out thinly ensuring mediocre or sub-optimized outcomes. United we stand, divided we fall. In other words, the community and the common good is indeed alien to us.

The bottom line: At every fork in the road, we took the wrong turn. Is it because our instincts have robbed us of dynamism and foresight? Let’s pause and challenge the assertion. Can we internalize what dynamism and foresight entail? How come we have not outgrown our love affair with the jeepney? 

We are parochial and insular. We value hierarchy and paternalism, rely on political patronage and oligarchy, that at the end of the day, ours is a culture of impunity.

Are we yet to internalize the imperatives of development and nation-building?

Take what economists call opportunity cost. That there is no free lunch. Infrastructure development is a case in point. Industrialization is another. We chose not to incur these costs and yet we expect quick fixes. There is no patronage or manna from heaven when it comes to nation-building.

Unsurprisingly, we find Juan de la Cruz between a rock and a hard place. Worse, we are yet to produce leadership to approximate a Mahathir, for instance. Alternatively, a Lee or Deng.

Gising bayan!

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“Now I know why Paul dared to speak of ‘the curse of the law’ (Galatians 3:13). Law reigns and discernment is unnecessary, which means there is little growth or change in such people. When you do not grow, you remain an infant.” [Faith and Science, Open to Change, Richard Rohr’s Daily Meditation, 23rd Oct 2017]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“You have to have a dream, whether big or small. Then plan, focus, work hard and be very determined to achieve your goals.” [Henry Sy Sr., Chairman Emeritus and Founder, SM Group (1924 - 2019)]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]